Lawsuits seek to protect Santa Ana housing funds

A sign facing Santa Ana Boulevard lists the companies involved in the Station District project, including Related California. RON GONZALES, ORANGE COUNTY REGISTER

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Scaffolding remains in place in some areas of the Station District housing development in this photo taken last month. RON GONZALES, ORANGE COUNTY REGISTER

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Workers recently were working on freshly poured concrete at the Station District. The Santa Ana City Council is fighting a demand from the state that it pay millions of dollars in funds that Santa Ana contends it must use for low- and moderate-income housing such as the Station District. RON GONZALES, ORANGE COUNTY REGISTER

SANTA ANA – Two lawsuits have been filed, seeking to ensure that funds designated for housing for needy families are used for that purpose.

In one lawsuit filed Monday, attorneys from the Santa Ana-based Public Law Center sued in Sacramento County Superior Court on behalf of four residents who would benefit from the creation of housing for low- and moderate-income families. The lawsuit seeks an order that low- and moderate-income housing funds generated from redevelopment project areas of Santa Ana be protected from distribution to other public agencies, and be used for housing under the terms of a series of legal agreements reached in the 1980s and 1990s.

In the other lawsuit, Santa Ana Station District LLC and other plaintiffs sued to ensure that housing funds designated for the Station District development are used for that purpose. A temporary restraining order was issued Friday, and a hearing is scheduled April 25.

"We want to prevent the transfer of existing low- and moderate-income housing money," said A. Christian Abasto, director of litigation for the Public Law Center. "There is a crucial need for affordable housing in Orange County ... And this is one of the few pots left to build affordable housing."

The suits are the most recent outgrowth of the dissolution of redevelopment agencies under a 2011 state law. The state contends that the city must turn the money over following dissolution of California's 400 redevelopment agencies, which were required to set aside a portion of the property tax revenue they received for low- and moderate-income housing.

The state Department of Finance indicated that, if Santa Ana failed to pay the money, it faced the loss of sales and property tax allocations, which would go to school districts and other government entities.

City leaders in December decided at a special meeting to fight a demand from the state that it pay $56 million in funds that Santa Ana contends it must use for low- and moderate-income housing – an amount later reduced to $54.2 million, and as of Feb. 25, set at $55.3 million.

The council in December instructed the city attorney to take any legal action needed to protect the city's interests, to pay any legally enforceable obligations it has to developers of affordable housing and to work with the community and other cities in any action against the state.

In a closed session last month, the City Council changed direction, and directed staff not to release any further payments under the development agreements. To make the payments would put the city's general fund at risk, city officials said.

The two recently filed actions are among nearly 50 active lawsuits, said H.D. Palmer, spokesman for the state Department of Finance, challenging the department's findings in connection with redevelopment funds in a complex variety of situations. Irvine is among the cities that has sued, over $1.4 billion in local property tax revenue the city was depending on to build the Orange County Great Park; Orange and the County of Orange have also sued.

The Public Law Center lawsuit spelled out five court-ordered judgments requiring Santa Ana to set aside certain percentages of funds from redevelopment project areas for low- and moderate-income housing. They are, the lawsuit said, "enforceable obligations" under the state law that dissolved redevelopment agencies.

Among the plaintiffs in the suit are two families that benefited from Santa Ana contracts with Habitat for Humanity of Orange County. One of the families may have to leave its Habitat home, the suit said, while construction of another Habitat home may cease. A third plaintiff is on a waiting list for affordable housing, while a fourth is unable to find affordable housing in the city.

In addition to commitments made to Habitat for Humanity of Orange County, the lawsuit spelled out three other affordable housing developments with city contracts, including Vista del Rio, the Station District and Santa Ana WEBB – in total representing some 236 housing units.

The Public Law Center suit lists the state Department of Finance, its director and Orange County's auditor-controller as defendants, with Santa Ana – the "successor agency" of its redevelopment agency – and the city's Housing Authority as real parties in interest – meaning they have a stake in the case.

The Station District near the Santa Ana Regional Transportation Center includes rentals that are part of two phases nearing completion. One phase includes 74 units, with completion expected in about two months. The other phase has 40, and it also has 10 historic homes in the Lacy Street neighborhood. It's nearly completed.

The Station District lawsuit, filed Feb. 22, seeks to prevent nearly $4.8 million in escrow accounts for the two phases from being distributed to the county auditor-controller or any taxing entities. If the money isn't protected, according to court documents, the Station District, which also includes 24 for-sale units, would be left without sufficient funds to complete construction.

Attorney William H. Ihrke of Costa Mesa, representing the Station District, said that the temporary order by Judge Timothy W. Frawley was directed at the $4.8 million, "to make sure that the money not be swept away by dictate of the state Department of Finance."

Plaintiffs in the case are Santa Ana Station District LLC, Station District Housing Partners and Station District II Housing Partners. Defendants are the state Department of Finance; its director; the Santa Ana Housing Authority; the city as successor agency to the Community Redevelopment Agency; the county auditor-controller's office; and a variety of public agencies that would receive property taxes.

The Related Companies of California is general manager of Santa Ana Station District LLC, the master developer.

A third case pending in Sacramento has sought to enforce a settlement in a 1984 lawsuit brought by property owner Gerald Peebler that set aside a percentage of property tax money for public improvements in the South Main Street business corridor, as well as for affordable housing.

The Santa Ana Merchants' Association wanted to see that some $82 million in tax increments from a redevelopment area that encompasses the South Main Street corridor are used to its benefit.

The state Department of Finance, in a June 2012 lawsuit brought by Peebler, refused to recognize the settlement as enforceable. A judge last month ruled in favor of the state.

Robert Solomon, clinical professor of law at UC Irvine School of Law and an attorney for the plaintiffs, said the decision would be appealed.

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